Is Your Company Still “Small” for CIT Purposes in Nigeria?

Nigeria’s 2025 tax reforms changed how many companies are classified for tax purposes from 1 January 2026. The central question for many businesses is whether the new small-company threshold applies to them and whether they qualify for the 0% Companies Income Tax rate.

Under the current reform framework, a company generally qualifies as a small company for CIT purposes where its annual gross turnover does not exceed ₦100 million and its total fixed assets do not exceed ₦250 million, subject to the wording of the applicable gazetted legislation and any formal administrative guidance.

This means a company with turnover of ₦60 million or ₦90 million may still fall within the small-company category. Under the previous regime, companies above the old small-company limit could have been treated as medium or large companies for CIT purposes.

What Changed Under the New Tax Framework?

Before the reforms, the Companies Income Tax Act framework generally treated a company with gross turnover of ₦25 million or less as a small company. Companies with higher turnover could face the 20% medium-company rate or the 30% large-company rate, depending on their classification.

The Nigeria Tax Act, 2025 introduced a wider small-company framework. The reform increased the relevant turnover ceiling to ₦100 million and added a fixed-asset test of ₦250 million.

The Nigeria Tax Act commenced for relevant tax purposes from 1 January 2026. The Federal Ministry of Finance’s transition guidelines state that returns relating to accounting periods ending before 1 January 2026 are dealt with under the previous tax laws, while returns for accounting periods ending from 1 January 2026 are administered under the new framework.

Small-company test

A company needs to examine both financial measurements:

The tests operate together. A company that satisfies the turnover limit but exceeds the fixed-asset limit may not qualify as a small company. Likewise, a company with fixed assets below ₦250 million but turnover above ₦100 million may fall outside the small-company category.

What Does “Gross Turnover” Mean?

Gross turnover is the total revenue earned from the company’s business activities before deducting expenses such as salaries, rent, logistics, interest, depreciation, advertising, or administrative costs.

It is not the same as:

• Net profit.
• Taxable profit.
• Cash remaining in the company’s bank account.
• Share capital.
• Owner’s drawings.
• Profit after expenses.

For example, assume a company records the following sales during the year:

The company’s gross turnover is ₦85 million, even if its profit after expenses is only ₦6 million. For the turnover test, the relevant starting figure is generally the total business revenue, not the ₦6 million profit.

The company’s accounting records should separately identify revenue, proceeds from asset disposals, loans, equity injections, and other receipts. A bank inflow is not automatically turnover, and turnover is not necessarily identical to every amount paid into a bank account.

The Fixed-Asset Test

The second test concerns total fixed assets. Fixed assets are long-term business assets used in operations rather than held for immediate resale.

Examples may include:

• Factory buildings.
• Office premises.
• Production equipment.
• Motor vehicles used by the business.
• Computers and office equipment.
• Furniture and fittings.
• Warehouses and installations.

The relevant figure should be supported by the company’s accounting records and asset register. A company with gross turnover of ₦80 million but fixed assets of ₦275 million may fail the small-company test because the asset limit is exceeded.

Example: turnover passes, assets fail

A manufacturing company reports:

• Gross turnover: ₦78 million.
• Total fixed assets: ₦280 million.

Although its turnover is below ₦100 million, its fixed assets exceed ₦250 million. On those figures, it would not satisfy both conditions for small-company status.

Example: both tests pass

A retail company reports:

• Gross turnover: ₦96 million.
• Total fixed assets: ₦140 million.

The company is within both limits. It may therefore qualify for small-company treatment, provided no other exclusion applies and its accounts support the figures.

Does 0% CIT Mean No Tax Compliance?

No. A 0% CIT rate is different from having no filing obligation.

Section 11 of the Nigeria Tax Administration Act, 2025 requires every company, including a company granted an exemption from tax, to file an annual income-tax return. The return includes the required self-assessment information and financial statements or, where permitted, an attested statement of accounts for a small company.

This means a qualifying company may have no CIT payable but still needs to:

1. Maintain appropriate accounting records.
2. Calculate and document its turnover.
3. Prepare a fixed-asset schedule.
4. File its annual company income-tax return.
5. Retain invoices, receipts, payroll records, bank statements, and supporting documents.
6. Respond to lawful requests from the relevant tax authority.

The Federal Inland Revenue Service’s older CIT guidance states that existing-company returns were filed within six months after the end of the accounting year. The new administration framework also provides a six-month filing period for companies that have been in business for more than 18 months, while newly incorporated companies have separate timing rules. Companies applying the new regime should use the current statutory provisions and applicable NRS guidance for their filing period.

A 0% Rate Is Not the Same as Zero Responsibilities

A qualifying company may still have obligations relating to taxes other than CIT. Small-company status for corporate income tax does not automatically remove every tax obligation.

Depending on the nature of the company’s activities, separate issues may arise under:

• Value Added Tax.
• Withholding tax.
• Pay-As-You-Earn obligations.
• Stamp duties.
• Import duties.
• State or local government levies.
• Taxes connected with specific transactions.
• Sector-specific taxes and regulatory charges.

The Nigeria Tax Administration Act treats VAT compliance separately. Section 22 provides for VAT returns and states that the return requirement does not apply to a small business, subject to the conditions and options contained in that section. A small business may also elect in writing to opt out of the exemption, register, charge VAT, and file returns.

This is why the following statement is unsafe:

“My company is small, so it does not need to register, file, or account for any tax.”

The legally relevant question is more precise: small for which tax, under which Act, for which accounting period, and subject to which conditions?

CIT Status Versus VAT Status

The words “small company” and “small business” may appear similar but can operate in different statutory contexts.

A company can therefore be treated as small for one purpose without every other tax rule producing the same result.

For example, a company with ₦90 million turnover may qualify for the small-company CIT treatment if it satisfies the fixed-asset and other conditions. It may nevertheless need to examine its VAT position separately, especially if it makes taxable supplies, opts into VAT, or later ceases to meet the small-business conditions.

Professional Services and the Classification Question

The legislation has generated discussion about whether companies providing professional services qualify for small-company treatment. Earlier versions and published interpretations of the Nigeria Tax Act contained an exclusion for businesses providing professional services, while other circulating materials and later discussions have described changes to the wording.

Professional services may include activities requiring specialised knowledge, professional qualifications, or regulated expertise, such as:

• Legal services.
• Accountancy and audit services.
• Management consulting.
• Architectural services.
• Engineering consultancy.
• Certain advisory and technical consultancy services.

A company providing professional services should not rely solely on its turnover or fixed-asset figures. It should read the applicable gazetted text for the relevant period and check any formal circular, regulation, or clarification issued by the Nigeria Revenue Service or the Federal Ministry of Finance.

This point matters because a professional-services company with turnover of ₦20 million could face a different result from a trading company with the same turnover if the statutory exclusion applies to the relevant period and activity.

What Happens If Turnover Exceeds ₦100 Million?

Where annual gross turnover exceeds the applicable threshold, the company may no longer qualify as a small company for that accounting period. The result is not determined by the company’s informal description of itself as an SME; it is determined from the statutory tests and supporting records.

Consider this example:

The fixed assets are within the ₦250 million limit, but gross turnover exceeds ₦100 million. The company would therefore need to calculate its CIT position under the rules applicable to companies outside the small-company category.

The tax calculation is based on taxable profit, not turnover. If the applicable CIT rate were 30%, a simplified illustration using ₦18 million of taxable profit would be:

[ \text{CIT} = ₦18,000,000 \times 30% = ₦5,400,000 ]

This is only an illustration. Actual taxable profit may differ from accounting profit because of allowable deductions, non-deductible expenses, capital allowances, exemptions, incentives, and other provisions of the Nigeria Tax Act.

Worked Classification Examples

Example 1: qualifying trading company

• Turnover: ₦48 million.
• Fixed assets: ₦65 million.
• Activity: wholesale distribution.
• Professional-service exclusion: not applicable based on the stated activity.

The company satisfies the two financial thresholds. It may qualify as a small company for CIT purposes, subject to proper records, filing, and the applicable statutory interpretation.

Example 2: turnover below the limit but assets above it

• Turnover: ₦42 million.
• Fixed assets: ₦265 million.
• Activity: food processing.

The turnover test is satisfied, but the fixed-asset test is not. Both conditions need to be considered together.

Example 3: turnover above the limit

• Turnover: ₦103 million.
• Fixed assets: ₦120 million.
• Activity: retail.

The fixed-asset test is satisfied, but turnover exceeds ₦100 million. The company should calculate its tax under the rules for the applicable non-small-company category.

Example 4: professional-services company

• Turnover: ₦18 million.
• Fixed assets: ₦30 million.
• Activity: management consultancy.

The financial figures are below the limits, but the nature of the activity creates an additional classification issue. The company should review the operative statutory wording and current official guidance before claiming small-company treatment.

A Practical 2026 Review Checklist

A company reviewing its status can organise its records using the following steps:

1. Identify the accounting period being assessed.
2. Separate periods ending before 1 January 2026 from periods governed by the new framework.
3. Add gross business revenue from all relevant sources.
4. Remove non-turnover receipts such as genuine loans and equity contributions from the turnover calculation, while retaining supporting documentation.
5. Prepare a fixed-asset register showing the company’s long-term operating assets.
6. Review the company’s actual business activities for any statutory exclusion.
7. Calculate taxable profit separately from gross turnover.
8. Check CIT, VAT, withholding tax, payroll, and other obligations independently.
9. Prepare the required annual return even where CIT payable is 0%.
10. Keep the records supporting every threshold conclusion.

Common Mistakes to Avoid

Using profit instead of turnover

A company with ₦120 million revenue and ₦4 million profit does not automatically pass a ₦100 million turnover test because its profit is low.

Ignoring fixed assets

Turnover is only one part of the classification. The fixed-asset ceiling also needs to be tested and documented.

Treating all receipts as sales

Loans, share capital, and certain asset-sale proceeds may require separate treatment. They should not be included or excluded casually.

Assuming exemption removes filing duties

The tax authority may still require a return, accounts, schedules, and evidence supporting the company’s claim.

Applying the new rule to an old accounting period

The Federal Ministry of Finance’s transition guidance states that pre-2026 accounting periods continue to be treated under the repealed laws, while later periods fall under the new framework.

Helpful Resources

For a practical estimate, use ToolBase’s Company Income Tax Calculator after determining whether the company is within the applicable small-company threshold. You can also compare the VAT implications with the VAT Calculator.

Conclusion

For 2026 CIT purposes, the key review is whether the company’s annual gross turnover is within the applicable ₦100 million ceiling, its total fixed assets are within ₦250 million, and no statutory exclusion or other condition changes the result. A company that previously assumed it had graduated from small-company status may still qualify under the expanded framework, but the classification needs to be supported by accounts, asset records, activity descriptions, and the correct accounting-period rules.

The Nigeria Tax Act applies the substantive tax rules, while the Nigeria Tax Administration Act addresses registration, returns, administration, and compliance procedures. The Federal Ministry of Finance has also issued transition guidance for moving from the former tax laws to the 2025 Tax Acts effective from 1 January 2026.

This article is for educational purposes only and does not constitute professional advice. Consult a qualified professional for your specific situation.

References

The former small-company framework and ₦25 million turnover threshold are reflected in the Companies Income Tax Act materials published by the Federal Inland Revenue Service. The 2025 tax framework and its transition from the previous laws are addressed by the Nigeria Tax Administration Act, 2025 and the Federal Ministry of Finance’s transition guidelines. Taxpayers should rely on the current gazetted legislation and formal guidance applicable to their accounting period.